Genius Move! Russian Revenues Cut In Half! - RFU News

Today, Russia has suffered a massive defeat on the economic stage.

Here, OPEC+ has cut Russia at the knees and offered India a cheap alternative to Russian oil to avoid further sanctions. With Russia desperately offering to sell its remaining oil at an even further discounted rate, revenues are dropping far lower than previously predicted, as Russia’s main economic crutch is being snapped in two.

India has been under a 50% tariff from the US since earlier this month, citing India’s continued purchase of Russian oil and weapons. While state-run Indian oil refineries had initially halted purchases of Russian crude, the complete halt of imports that the US was aiming for has not yet been realized. However, the Republican-led Sanctioning Russia Act, which promises additional tariffs of 100% to 500% already has an 84 senator majority in the US Senate, far exceeding the 67 threshold needed to override any presidential veto. The threat of an effective trade embargo by the US would cripple the Indian economy, which relies on the US for one-fifth of its exports, or nearly 90 billion dollars in 2024. Still, New Delhi has warned that making such a switch would be near-impossible, as it relies on Russia for almost 40% of its oil imports, meaning it would crash the global oil market and skyrocket prices through its sudden increased demand. However, US reports indicate that half of India’s oil imports from Russia are being resold on the global market at a profit, a scheme that can be easily halted.

Still it is not enough, but fortunately for India, Saudi Arabia’s OPEC+ coalition is seizing the opportunity to replace Russia as India’s main oil supplier. Recently, OPEC+ has announced it would increase oil production by 548,000 barrels per day, allowing India to immediately replace over half of their required imports from Russia, at a similar price and without crashing the global oil economy. Additionally, India’s largest oil refiner has already bought over 7 million barrels from the US this month, as other oil-producing nations and companies are likely to join in on the move made by Saudi Arabia and further replace Russia’s large share in India’s oil market.

Russia is observing these developments with wary eyes, as it is becoming clear that India will not choose to remain on Russia’s side if it means it would suffer major economic losses. India accounts for roughly 45% of total Russian oil exports, and a complete stop would be a hit to the Russian wartime economy that it is unable to sustain. This is why Russia is already desperately trying to find alternative buyers for nearly half of its oil exports. Notably, Bloomberg reports that Russia has offered China the oil that India has already refused, at an even further discounted rate. Analysts state that China is likely to take further advantage of Russia’s increasingly isolated position, as Russia has few further options.

Excluding the possibility of Russia finding buyers for its increasingly lower price of oil, if India stops buying Russian crude altogether, this could add an additional 27 billion dollars or 1.3% of GDP on top of an already 2.5% Russian budget deficit. Economists note that a possible deficit of over 3.8% or 91 billion dollars would even turn Russian nominal economic growth on paper into a full-blown recession, despite the Russian government actively pumping money into the system and high wartime casualty compensations and signing bonuses boosting local economies. Making this worse, despite Russia being a part of OPEC+, its increasingly limited options in global export markets won’t allow it to profit from increased production, which could lower global oil prices further and hurt Russian revenue streams even more.

Overall, economic threats and secondary sanctions from the West are removing the sidelines many countries have been standing on for the past 3 years. And while some countries are choosing to side with Russia, many see this as an opportunity to take control of Russian shares in the global resource markets, including some of Russia’s former allies. With increased production by OPEC+ giving India an alternative to Russian oil imports, Russia’s only choice is to let its remaining allies take advantage of it, as a budget deficit risks spiraling into a full-blown economic recession.